Banks Accused of Price-Fixing Agency Bonds

MANHATTAN (CN) — Traders at five major banks conspired to rig the prices of a certain class of bonds, a pension fund for Boston’s city workers claim in federal court. In addition to four individual bond traders, all Brits, the complaint filed Wednesday by the Boston Retirement System takes aim at Bank of America, Credit Agricole, Credit Suisse, Deutsche Bank and Nomura International. Each corporate defendant is top international trader of instruments known as SSA bonds, short for Supranational, sub-sovereign and agency. They “dominate the secondary market, acting as “market-makers” that provide liquidity to investors by their willingness to buy and sell SSA bonds whenever an investor seeks to do so,” according to the complaint. “Driven by greed and opportunity,” the 46-page complaint states, the defendants and their traders “entered into an illegal scheme to fix the bid-ask spreads for SSA bonds sold to investors.” Because of the trades price-fixing activities, “investors received non-competitive prices for their secondary market SSA bond trades,” according to the complaint. The lawsuit says traders with the banks swapped text messages and took to chatrooms to discuss customers’ SSA bond purchases and sell orders, “confidential information about their customers’ identities, trading habits and order sizes.” “The exchange of this sensitive customer information enabled defendants’ traders to coordinate the bid and ask prices they offered to their respective customers,” the complaint states. The traders then tried to back-track and cover-up by “holding out their activities in the SSA bond market,” “maintaining the secrecy of their price-fixing scheme,” and “avoiding any discussion in public regarding their collusive activities in manipulation of SSA bond prices,” Boston Retirement says. The banks also failed to self-monitor and avoid such alleged activities among their employees. “Such internal failures made it all the more difficult for plaintiff, the class, government regulators, and the public to become aware of defendants’ and their co-conspirators’ misconduct,” the lawsuit claims. In addition to the banks, the four SSA bond traders named as defendants are Hiren Gudka, of Middlesex; Amandeep Singh Manku, of Essex; Shailen Pau, of London; and Bhardeep Singh Heer, of Essex. Boston Retirement is represented by Gregory Asciolla with Labaton Sucharow.